Market making enforces a reciprocity norm that sustains the market itself

Evidence

As market makers, traders are expected, within limits, to offer deals to other traders who make price requests, even if the deal runs against their current financial interests, to reciprocate for others’ willingness to deal in their turn. As a generalized principle, dealing reciprocity displays the market as a place where solidarity in a common goal, that of sustaining the market, can be expected—with the role of market maker designed to perform the sustaining function. — Karin Knorr Cetina & Urs Bruegger, Global Microstructures, 87

Categorization

• DEFINE: Defines the normative content of ‘dealing reciprocity’ as it operates among market makers.
• XREF: Connects to reciprocal exchange and gift-economy literature (Mauss) applied to financial markets. — connects to: Costly norm enforcement by unaffected bystanders reveals strong reciprocity. — Ernst Fehr, Third-Party Punishment and Social Norms, 2; Reciprocity motivations can be self-reinforcing where further interactions are plentiful; Reputational incentives, not only reciprocity, make thick relationships foster trust — Russell Hardin, Trust and Trustworthiness, 143 (+12 more)

Broader Connections

• Reciprocal trust creates mutual incentives for trustworthiness #corroborates (0.88) — Nicolas Baumard, A mutualistic approach to morality, 166
• Reciprocity motivations can be self-reinforcing where further interactions are plentiful #expands (0.85)
• Cooperative market norms can be stable equilibria even amid free-rider incentives #corroborates (0.85) — Lisa Bernestein, Opting out of the Legal System, 190
• Costly norm enforcement by unaffected bystanders reveals strong reciprocity. #expands (0.82) — Ernst Fehr, Third-Party Punishment and Social Norms, 2
• Screen-based reciprocal observation can generate intersubjectivity across geographic distance in markets. #expands (0.82) — Karin Knorr Cetina & Urs Bruegger, Global Microstructures, 60
• Moral reciprocity can produce trustworthiness in the encapsulated-interest sense #expands (0.82) — Russell Hardin, Trust and Trustworthiness, 217
• Meritocratic fairness norms evolved as adaptations to partner-choice markets #exemplifies (0.80) — Nicolas Baumard, A mutualistic approach to morality, 324
• Reputational incentives, not only reciprocity, make thick relationships foster trust #qualifies (0.78) — Russell Hardin, Trust and Trustworthiness, 143
• Economic and social exchanges differ sharply in time horizon and expected reciprocity #qualifies (0.75)
• Moral behavior shifts with the market supply and demand of cooperative partners #complicates (0.75) — Nicolas Baumard, A mutualistic approach to morality, 394
• Small communities enforce generalized reciprocity rather than one-on-one exchange #complicates (0.74) — Russell Hardin, Trust and Trustworthiness, 821